Yesterday, I calculated the current valuation of Xiaomi Automobile, and some people in the message area said that I favored one over the other, and my ass decided to make my head, deliberately suppressing the valuation of Xiaomi Automobile, and raising Cialis by "stepping on one and holding one". I'm sorry, I didn't.
1. Introduction to the price-to-sales ratio valuation method
The price-to-sales ratio, also known as the "price-to-revenue ratio," is the ratio of a stock's total market capitalization to sales revenue (or revenue). This ratio helps us understand what the market is willing to pay for every dollar of a company's sales revenue. The valuation formula is simple, business valuation = price-to-sales ratio × operating income for a full year.
The price-to-sales ratio method is generally used to evaluate companies that have growth potential but may not yet be stable profits, such as service companies with low cost-of-sales ratios, or companies in traditional industries with similar cost-of-sales ratios. For start-ups or companies in emerging industries, the price-to-sales valuation method can also provide a valuable reference as they may not yet have a stable track record of earnings. As of the end of 2023, Cialis and Xiaomi Auto have not yet achieved profitability, and they are expected to continue to grow rapidly in the next three years, so it is appropriate to adopt the price-to-sales ratio valuation method for Cialis and Xiaomi Auto.
The reason why the price-to-sales ratio can be used as an effective valuation tool is that during the period of rapid growth, corporate revenue does not fluctuate as dramatically as net profit, and revenue data is relatively less prone to manipulation. However, this approach has its limitations, such as the fact that it does not reflect changes in costs, which are one of the most important factors affecting a business's cash flow and value. Therefore, when using the price-to-sales ratio valuation method, it should be combined with other financial indicators and valuation models for comprehensive evaluation to ensure more accurate valuation results.
2. Comparison of the valuations of Cialis and Xiaomi Auto
(1) Price-to-sales ratio
Based on the closing price on April 5, Li Auto's price-to-sales ratio is 1.81. When estimating the value of Cialis, I value Li Auto at a price-to-sales ratio of 1.81x, and when estimating the value of Xiaomi Auto, I believe that Xiaomi Auto is just starting out, and its future growth model is better, so it can be valued at 2x P/S ratio.
(2) The operating income of the next full year
1. Cialis. In my article "Cialis Performance Outlook for the Second Quarter of 2024", I estimated that the operating income of Cialis in the second quarter of 2024 will be about 42.476 billion yuan, theoretically, Cialis is still in rapid growth, and the quarterly operating income should be increased quarter by quarter, and it is conservatively estimated that the operating income in the third and fourth quarters should not be less than 42.476 billion yuan multiplied by 4, and the operating income of Cialis in the first quarter is about 25.663 billion yuan, that is, the total operating income of Cialis in 2024 will not be less than 153.091 billion yuan.
2. Xiaomi Auto. According to the production capacity planning, the market predicts that the maximum output of Xiaomi SU7 this year will be around 100,000 units, and a number of institutions have released research reports saying that the delivery of Xiaomi cars this year is expected to be 60,000 to 80,000 units. Let's take 80,000 units as an example, the price of Xiaomi SU7 is 215,900 yuan to 299,900 yuan, and the average sales price is about 257,900 yuan per unit, that is, the sales of Xiaomi Auto in 2024 will be about 20.632 billion yuan, and the revenue of Xiaomi Auto in 2024 can be calculated based on 1.13.
(3) Valuation
Considering that Cialis Automobile actually holds about 80% of the equity of "Wenjie", if the concept of equity operating income is considered, then, the valuation of Cialis = 153.091 billion yuan× 1.81×80% = 221.676 billion yuan (note: the valuation here is underestimated, because it is assumed that there is no growth in the 3×rd and 4th quarters, which is unreasonable for a company like Cialis to tell growth); 2 = 36.516 billion yuan.
3. Summary
Above, I discounted the operating income and price-to-sales ratio of Cialis, and gave a premium to the valuation of Xiaomi Auto, but there is still a huge difference in valuation for two reasons:
One is because Cialis and Xiaomi Auto are at different stages of development. The first model of Cialis is the M5, which was first launched on December 23, 2021 and officially launched on February 25, 2022, 2 years earlier than Xiaomi released its first new car SU7.
Second, the overall competition in the industry has intensified, and the overall valuation of the industry has declined, with NIO rising to $66.99 per share in 2021 and now only $4.39 per share, less than a fraction of that time. Therefore, the current valuation of Xiaomi cars is not high, which does not mean that Xiaomi cars are not excellent, but only that the industry is gradually maturing, and the era when PPT can be exchanged for money is gone.
I know that many rice fans have great expectations and enthusiasm for Xiaomi and Mr. Lei, but the matter of valuation still has to be discussed on a case-by-case basis.
Of course, I can also say something beautiful, midnight dream, Xiaomi car sales after a few years have achieved an annual production and sales of 1 million units, the average sales price of more than 300,000 yuan / vehicle, annual revenue of about 300 billion yuan, valuation of 4000 to 500 billion yuan - another "Xiaomi". But does it make sense for me to say this now? Will the capital markets buy it?